Unusual Call Buys in Small Pain Management Med-Tech with Dominant Market Share
Zynex (ZYXI) traded 12X daily calls on 8/6 as 2350 February $15 calls were actively bought in the $3.40 to $3.60 range, although in mostly smaller lots. ZYXI is a stock that made a crazy run in 2020 but has since retested that original breakout and has been basing with higher lows since last October above key $13.50 support. ZYXI designs, manufactures, and markets medical devices designed to treat chronic and acute pain, as well as activate and exercise muscles for rehabilitative purposes with electrical stimulation. ZMI devices are intended for pain management to reduce reliance on medications and are designed to provide rehabilitation and increased mobility. The ZMI devices are small, portable, battery operated, and include an electrical pulse generator that is connected to the body via electrodes. The products are cost effective when compared to traditional physical therapy, and often result in better mobility, less pain, and increased potential for a patient to return to work earlier than with traditional therapies alone. Its products require a physician’s prescription before they can be dispensed in the U.S. and the NexWave requires consumable supplies, such as electrodes and batteries, which are shipped to patients on a recurring basis, as needed. ZYXI has a market cap of $625M and trades 3.6X EV/Sales and 20.85X earnings with a clean balance sheet. ZYXI posted revenue growth of 36%, 42.5% and 76% the past three years with 66.7% growth seen in 2021 and 43.7% in 2022. ZYXI profitability is also ramping with EBITDA seen growing 37% this year, 98.6% next year and 84% the year after. In the latest quarter revenues rose 61% Y/Y and Orders jumped 247%. ZYXI is also working on InWave for Incontinence treatment and NeuroMove for Stroke rehab. It sees the NexWave opportunity as $950M worldwide and the electrodes/batteries are 75% of the revenues. ZYXI does have a high short float at 18%. HCW lowered its target to $22 on 7/30 calling ZYXI the dominant leader in the US for prescription strength electrotherapy devices for pain management. B. Riley upgrade to Buy on 7/16 noting accelerating trends into 2H21 and 2022 along with increased leverage and improved profitability. The ZYXI options activity came on a day when Medtronic bought a small cap Med-Tech company XENT.